Ditto on really enjoying Spotify. I've paid for it for 5 years running, my oldest digital subscription, haha.On an investment basis, the question remains if Spotify can overcome the likes of Apple Music and Youtube (and their giant backers). The economics aren't great now, but if Spotify maintains share, it should benefit from larger shifts in the music industry and eventually improve its margin profile.

Honestly I don't think their economics improve. Mostly because their competitors are giants and have money to throw at investing in subs and services. And their suppliers are a tight oligopoly of basically 3-4 giants and then a bunch of independents.

Spotify is trying to discover/produce their own artists. So too for Apple Music, but I think that's a tougher game than for video content, which is/was Netflix's strategy.

I totally agree it's a tougher game than Netflix. I think the bull case has to rely on Spotify becoming an aggregator in the long run and achieving more favorable revenue sharing arrangements as opposed to the status quo.

"What is the real alternative to the labels working constructively with Spotify over the long-term to maximize the value of their catalogs by driving global adoption of streaming? It seems to me that the alternatives are potentially worse---i.e. risk concentrating market power in the hands of Apple (and the other two companies that could have a global presence-Amazon-Google should not make them more comfortable). There is always tension in supplier-retailer relationships-----particularly when it is new----but over time, most suppliers benefit from maximum distribution---and the retailer that builds the most scale will offer maximum distribution. It seems like Spot has a good chance to be the largest retailer of streaming music services, or one of the scale companies, due to its head-start, brand, technology, and focus. Because this market is going to be enormous and will grow for a long-time, that is a good place to be.

It seems unlikely that the labels are going to be able to puppeteer an industry structure that is most hospitable to their needs and economics by playing hardball with Spotify because they think Spot has a better valuation than they do or can afford to make margin concessions. I guess its possible that this industry structure could evolve into one with a lot of supplier power, such as Nike versus the retailers--but that assumes that retail distribution of streaming audio services is effectively a commodity that is easily substitutable. That seems to be the essential issue here: if you believe that streaming music services are effectively a commodity because they basically all have the same content--then over time----that is probably not good for Spot. Of course, if you take that outcome to its logical conclusion, then the low-cost retailer is going to enjoy the most market power--and this could become a Wal-Mart/CPG model with Amazon or Apple playing the role of Wal-Mart (the services will just get bundled with other products from one of the tech giants). That is arguably worse for the labels than a healthy and profitable spotify serving as a check on the tech giants who are only interested in music as means to monetize other larger businesses (consumer products/Amazon Prime).

On the other hand, if you believe that the merchandising, presentation, and distribution of an audio service can meaningfully differentiate the quality of the consumer experience and can engender consumer loyalty over time--then the labels are going to be forced to do business with the best retailer on terms that suit that retailer. My feeling is that streaming is not going to be a commodity service--and that people are going to increasingly value the quality of the curation, discovery, and social sharing components of music in a way that is going to separate spot from its competitors. On something that is as personal as music that people are deeply passionate about--I believe there will be a huge base of customers that choose the best service for their needs--not the service that comes bundled with a smart home device or the service that is a few dollars cheaper."

Wonder what they will do with that content knowing they own the most valuable music platform real estate?

Interesting that the company also produces video

I think a separate podcasting app probably makes the most sense. It's obviously a give / take between keeping the existing music platform as-is and being able to integrate / push a higher margin product. I'm sure they could set it up where you "swap" into the Spotify Podcasts app from the music app, similar to how the Facebook app will automatically open messenger.

Logged

ajc

- OI, NI, FCF all simultaneously positive for 1st time in company history- Total MAUs up 29% YoY- Premium subscribers up 36% YoY- Total revenue up 30% YoY- Gross margin up to 26.7%- Net cash flows from operating activities up 58% YoY- 1.8B euros in cash and short-term investments